Ch 5 Smartbook/Quiz PF

With ____ -end credit, you pay back one-time loans in a specified period of time and in payments of equal amounts. With_____-end credit, you pay loans back on a continuous basis and you are billed periodically for partial payments.

closed, open

If you borrow $200 and it cost you $27 in interest with a service charge of $6, what is the finance charge?

$33 27 + 6 = 33

What would be the interest cost (simple interest) for a $2,000 loan with a 6% rate for a half of a year?

$60. $2,000 x 0.06 x 6/12 $2,000 x 0.06 x 0.50 = $60.

What are good deterrents of identity theft?

-Keeping checks in a safe place -Shredding documents before throwing them away

What are the best reasons to maintain good credit history?

-You are less likely to be denied credit. -You will have a good FICO score.

What is a credit bureau?

A reporting agency that collects information on how promptly people and businesses pay their bills

How does the Fair Credit Billing Act protect consumer credit ratings?

By allowing consumers to challenge charges that are false and avoid having delinquent charges added to their credit history

Which of the following prohibits certain practices by agencies that collect debts for creditors?

Fair Debt Collection Practices Act

Family loans are always simple arrangements and can benefit both parties with little or no documentation.

False

What occupation began using credit first?

Farmers

Under the Consumer Credit Reporting Reform Act, what would happen if a Credit Bureau verifies inaccurate information?

If the Credit Bureau is wrong about information, the consumer can sue for actual, possibly punitive damages.

Long-term financing is more costly than short-term financing because of higher _____ costs.

Interest

Why is it not good to spend your entire monthly income on credit card bills?

It is not good if you have no money left for emergencies.

What is an irresponsible use of credit?

Purchasing goods until your credit limit is reached.

A line of credit is a _____ -term loan that is approved before you actually need the money.

Short

Why should you avoid sharing sensitive personal information with strangers?

Strangers can take this information and purchase items in your name.

The Fair Credit Billing Act's underlining purpose is:

To protect consumer credit ratings

True or False: Credit is defined as an arrangement to receive cash, goods, or services now with payment in the future.

True

True or False: Creditors can use same collection methods with cosigner as could be used with the borrower.

True

True or False: The ECOA covers your mortgage application and bans discrimination based on race, color, age, sex, marital status, national origin, and several other factors.

True

True or False: The trade-off of using credit is it decreases the availability of money to spend in the future.

True

True or False: Using credit is safe, since charge accounts and credit cards let you shop and travel without carrying a large amount of cash. Multiple choice question.

True

A bank line of credit is also known as:

a revolving check credit

If you must _____ to pay off old debts, then this is a warning sign of debt problems.

borrow

A _______ -end loan from the bank for personal purposes, home improvements, or vacation expenses is considered installment cash credit.

closed

An example of ____-end credit is an automobile loan, whereas an example of ____-end credit would be a credit card.

closed, open

If you cannot make a payment on a debt when due, contact the _____ at once to work out a modified payment plan.

creditor

In a straight bankruptcy, many but not all ____ are forgiven

debts

The five Cs refer to:

policies that help determine who will receive credit

A loan that must be repaid in total on a specific day usually within 30-90 days

single lump-sum credit

If you borrow $200 and it cost you $22 in interest with a service charge of $5, what is the finance charge?

$27. 22 + 5 = 27.

A prearranged loan up to a specified amount that a consumer can access by writing a special check is known as

A revolving check credit

Consumer credit through installment payments became popular in the early part of the 20th century due to:

The popularity of the automobile

The FCBA is a major reason that consumers should buy high dollar items with a credit card rather than a debit card. True false question.

True

True of False: The Consumer Financial Protection Bureau has a website for registering complaints regarding credit card situations.

True

If you ______ a loan and the borrower does not pay the debt, you may have to pay up to the full amount of the debt as well as any late fees.

cosign

A line of _____ is the maximum amount of funds lent to a consumer.

credit

To calculate the debt payments to income ratio:

total monthly debt payments (excluding home mortgage) are divided by net monthly income

A prearranged loan for a specified amount of money that is accessed with special checks?

-A bank line of credit -A revolving check credit

One convenient aspect of using credit is that multiple charges can be accumulated and paid in one monthly

Bill or payment, charge, fee

A loan for a motorcycle is an example of:

closed-end credit

When making online purchases, you should:

use a secure browser, keep a record of the purchase, and review your statement.

A billing error is:

-a mathematical error -goods or services purchased without your authorization -when the business mails your statement to an incorrect home address -being forced to pay for defective goods

What is not a disadvantage of using credit?

Responsible use of credit can lead to stability

A typical grace period offered by many credit card issuers is

20-25 days

What should you do when you receive a phone call claiming to be from your bank?

Hang up, call your local bank, ask if there is something wrong with your account(s), and go to the bank the next day to verify your account(s)

Family members may only charge interest they would have earned on the money if they had deposited it in a ______ account.

Savings

Which of the following results from improper use of credit?

-Bankruptcy -Default and loss of credit rating

What would be the interest cost (simple interest) for a $3,000 loan with a 8% rate for nine months of a year?

180. 3,000 x 0.08 x 9/12 3,000 x 0.08 x .75 = 180.

The _____ handles complaints regarding credit cards online. Multiple choice question.

CFPB Consumer Financial Protection Bureau

Where does the Consumer Credit Reporting Act place the burden of proof for accurate credit information?

It places the burden on credit reporting agencies.